2020 (3) TMI 241 - AAR - GST

Classification of supply - supply of goods or supply of services - rate of GST - activity of Zinc Platting for customers in Automobile, General Engineering and Electrical Electronic Industries - HELD THAT - The applicants are undertaking the work of electroplating the components of automobiles, etc., provided by the customers as per their specifications made in the diagram. For doing the electroplating, they purchase metals such as Zinc Ingot, Silver Bullion, Nickel, Copper, Chemicals., Hydrochloric and Nitric Acid, SC casting. The customers send the components under Delivery challan with the reason for Transport as Outward-Job-work in the E-Way bill to the applicant. After doing Electroplating as per the specifications of the customer, the applicant raises invoice charging applicable GST and return the components stating outward supply in the E-way bills. The components are owned by the applicants customers and are sent to the applicant for electroplating and return back. The final product is also owned by the applicants supplier - the supply of the applicant is that of Supply of Service . Classification of the service - HELD THAT - SAC 9988 as per the Explanatory notes, covers those services characterized as outsourced portions of a manufacturing process - In the case at hand, the electroplating job done by the applicant is a portion of manufacturing process of the customer of the applicant and therefore, the activity of the applicant is covered under SAC 9988. Thus the activity of undertaking manufacturing services by a registered person on the physical inputs owned by another registered person is a job work . In the case at hand, the applicant is a registered person and when he undertakes electroplating activities on the goods belonging to another registered person, then the nature of work of the applicant is Job work . Rate of GST - HELD THAT - The applicable rate of tax from 30.09.2019, is given vide entry 26(id) of Notification No. 11/2017-C.T.(Rate) as amended by Notification No. 20/2019-C.T.(Rate) dated 30.09.2019, which is @ 6% CGST in cases when the goods are owned by another Registered person as in such cases the applicant supply engineering services as job-work and the applicable rate of tax in cases when the goods are owned by unregistered persons continues @9% CGST as per Si.No. 26(iv) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended.

Summary

Issues Involved:
1. Rate of Tax on GST for Electroplating
2. SAC Number for Electroplating

Issue-Wise Detailed Analysis:

1. Rate of Tax on GST for Electroplating:

The applicant, a partnership firm engaged in electroplating, sought clarity on the rate of GST applicable to their services. The firm receives components from customers, performs electroplating, and returns the finished products. The process involves various steps, including acid cleaning and quality checks.

Upon examination, it was determined that the applicant's activities fall under the category of "Supply of Service" as per Para 3 of Schedule II of the CGST Act, which states, "Any treatment or process which is applied to another person’s goods is a supply of services."

The relevant Service Accounting Code (SAC) for electroplating was identified as SAC 9988, which pertains to "Manufacturing services on physical inputs owned by others." This category includes services performed on physical inputs owned by units other than the service provider, characterizing them as outsourced portions of a manufacturing process.

The applicable rate of GST for such services was determined based on several notifications:

- Notification No. 11/2017-C.T.(Rate) dated 28.06.2017: Initially, the rate was set at 9% CGST and 9% SGST for manufacturing services on physical inputs owned by others.
- Amendments through subsequent notifications: Various amendments were made, including Notification No. 20/2019-C.T.(Rate) dated 30.09.2019, which reduced the rate to 6% CGST and 6% SGST for job work services provided to registered persons.

Summary of Applicable Rates:
- Up to 30.09.2019: 9% CGST and 9% SGST irrespective of whether the goods are owned by registered or unregistered persons.
- From 01.10.2019:
- For goods belonging to registered persons: 6% CGST and 6% SGST.
- For goods owned by unregistered persons: 9% CGST and 9% SGST.

2. SAC Number for Electroplating:

The SAC number for the electroplating services provided by the applicant was identified as SAC 9988, which covers "Manufacturing services on physical inputs owned by others." This classification is appropriate as the electroplating process performed by the applicant is a part of the manufacturing process of their customers, who retain ownership of the components throughout the process.

Ruling:

1. The activity of electroplating undertaken by the applicant is classified under SAC 9988 - "Manufacturing services on Physical Inputs owned by others."
2. The applicable rate of tax:
- Up to 30.09.2019: 9% CGST and 9% SGST.
- From 01.10.2019:
- For goods belonging to registered persons: 6% CGST and 6% SGST.
- For goods owned by unregistered persons: 9% CGST and 9% SGST.

This ruling provides clarity on the GST rate applicable to the electroplating services provided by the applicant and the appropriate SAC classification for these services.